Every conversation I’ve had with my podcast guests over the past 6 months have revealed both unique insights and practical advice on how to build resilience and drive the clean energy transition. My most recent discussion with Jules Kortenhorst, CEO of Rocky Mountain Institute, highlights how this nonprofit organization interacts with businesses and industries so that capital deployment, new technologies and innovation can get set and lead the next energy transition. That leadership will be developed through pragmatic approaches to research and pilot projects, in order to scale new solutions in the real world. Here are highlights from the conversation.
Demand Drives Energy Transitions, Not Supply
A decade ago, we spoke of the end of oil. A time when the world would be forced to look to new forms of energy because we would have depleted the worryingly scarce and increasingly remote resources. Turns out that was wrong. 200 years’ worth of fossil fuels are still in the ground, but both national and international oil and gas companies are starting to admit that much of it will stay there. Not only because oil prices are currently so low, but because demand for fossil fuel energy is peaking, displaced by more efficient innovation—renewable power combined with affordable and decentralized electricity storage and other low-carbon solutions.
The clean energy transition is already here, and electrons are replacing molecules much faster than forecasters expected. The shift is due to changing demand. Those companies who advocate decarbonization through existing fossil-fuel supply strategies now concede that they must change or face considerable risk of collapse from low prices and stranded assets. Many of the technology solutions to advance the transition to a distributed energy supply model are already in operation and are clearly cheaper, more reliable, and more sustainable than before.
Efficient Electrification of (Almost) Everything
Our incumbent energy system is highly inefficient. Fossil fuels are hard to transport and their highly centralized system relies on volatile and often inefficient supply chains. Our studies show 33 percent of the inefficiency is due to fossil-based electricity production, with 41 percent of energy wasted in outdated fossil-based heating technologies and modes of transport.
Electricity, however, offers a significantly more efficient system. In fact, electricity powered by renewable sources is virtually 100 percent efficient at end use and can be produced and managed locally and flexibly. Renewable energy is now the cheapest new electricity in countries that make up three quarters of the world’s GDP.
For businesses and consumers, renewable energies are today’s fast track to meeting decarbonization commitments and securing public support. Corporate demand for renewable energy is currently greater than current supply by 27 terawatt hours, and this gap is predicted to increase tenfold in the next 10 years.
Private businesses will be key in building a more resilient energy system by unlocking demand flexibility to strengthen fragile grids by managing more distributed energy resources, such as energy from rooftop solar panels, batteries, and electrical vehicles, as well as heating or cooling loads through energy retailers.
The New Energy System Is Being Built Right Now, Building by Building
The transition to a clean, prosperous, and secure zero-carbon energy future requires effective capital allocation in innovation. The private sector is key to developing and piloting clean energy technology and services to offer more options for decentralized engagement to build the low-carbon energy system.
As each building adds renewable energy generation and storage, itself becomes an energy asset. Our current delivery model no longer makes sense in this highly decentralized system with energy resources spread across the built environment.
“The new decarbonized energy model needs to be more productive, with more energy efficient industries and transportation systems driving economic growth, while making the world safer and more secure,” notes Jules Kortenhorst, Rocky Mountain Institute CEO.
Clean tech innovation will help private and public transportation, heating, and industrial processes switch rapidly to electricity, leveraging a robust connectivity infrastructure and solid digital backbone to operate the additional complexity of decentralization. Harder-to-abate sectors, such as trucks, railways and heavy industry processes, need to get mobilized and decarbonize with green hydrogen.
In 2019, only one-fifth of all globally deployed renewable capacity came from large utility-scale installations. Buildings across the decentralized grid are ramping up renewable capacity. Recently Schneider Electric has been working with Western Power in Australia to transform how they flexibly manage their distributed energy resource (DER) powered grid with commercial and industrial businesses playing an active role in integrating solar, storage and other flexible loads, responding and adapting to local needs while accelerating clean energy capacity.
Learnings from previous energy transitions
In previous energy transitions, change happened not because technology was forced to change, but because changes in demand fostered new energy sources. For example, coal replaced wood as it became easier to transport to cities. Oil took off thanks to the mass production of affordable cars. Today, there is huge potential to grow the share of electricity-powered transport, buildings and industries, offering safer and more efficient power, but businesses and consumers will only adopt new technologies when the alternative better meets their needs. We switched from horses to cars, landlines to cell phones, cable TV to streaming media for just that reason.
Our existing energy system is ripe for disruption—it is highly inefficient, increasingly vulnerable, and a major cause of climate change. The age of burning fossil fuels is over. A new era has now begun. Clean energies and digital technologies are part of the solution. Like any transition, this will take place in phases – through experimentation and sustained growth in new energies and driving technology breakthroughs – to resolve the most complex areas of fossil fuel usage. The challenge of this clean energy transition is how to push fossil fuels to the tipping point this decade.